U.S. Investigating Gasoline, Oil Trading at BP

From Bloomberg News

Oil giant BP is being investigated for possible manipulation of crude oil and gasoline prices, the company confirmed Tuesday, raising concern that the company has failed to manage its U.S. operations.

BP’s trading of crude is being reviewed by the U.S. Commodity Futures Trading Commission, while the Justice Department is probing the company’s gasoline business, BP spokesman Robert Wine said. The trading panel alleged in June that London-based BP, the world’s third-largest oil company, attempted to corner the propane market.

BP and Chief Executive John Browne face grand jury probes into the spill of 6,400 barrels of oil in Alaska in March and a refinery explosion in Texas City, Texas, that killed 15 people in 2005.

BP’s U.S.-traded shares fell $1 to $67.30. The shares have fallen 17% since April 24, compared with a 7.6% jump at Exxon Mobil Corp. in the same period.


“The company is in a minefield right now -- every time they turn around, there is an explosion,” said Fadel Gheit, senior vice president of oil and gas research at Oppenheimer & Co. “There is no win here. It’s either a loss or a draw. They are trying to minimize the loss.”

BP for six years has advertised itself as an environmentally friendly company, changing its corporate logo to a sunburst from the BP shield and saying its initials stand for “Beyond Petroleum.”

The company is “aware of investigations being done by U.S. authorities,” Wine said, adding that BP does not comment on the specifics of such probes.

The inquiries were reported Tuesday by the Wall Street Journal, which said the Commodity Futures Trading Commission had sent subpoenas to BP and other energy traders in its study of crude oil over-the-counter prices in 2003 and 2004. Federal authorities are also assessing whether BP used information about its pipelines and storage tanks in Cushing, Okla., the delivery point for U.S. crude futures contracts, to influence benchmark prices, the newspaper said.


The gasoline study, which has been going on for more than a year, includes a criminal probe by the Justice Department and is focused on one day’s trading on the New York Mercantile Exchange in 2002, the newspaper said, citing unidentified lawyers and traders.

Dennis Holden, a commodity commission spokesman, would neither confirm nor deny that BP is under review. The Justice Department doesn’t comment on criminal probes, department spokesman Bryan Sierra said.

“BP is known for being an extremely aggressive trader of crude, so it’s an easy accusation to throw at them,” said Bruce Evers, an oil analyst at Investec Henderson Crosthwaite in London. “Investors should keep an eye on it, but it shouldn’t cause too much concern.”

BP agreed to pay a $2.5-million fine by the New York Mercantile Exchange in September 2003 to resolve allegations of crude oil trading violations in 2001 and 2002. BP neither admitted nor denied breaking the futures exchange’s rules in that settlement.


In July 2003, BP agreed to pay $3 million as part of a settlement with the Federal Energy Regulatory Commission that had alleged the company profited from phony or “wash” trades in the power market during California’s energy crisis of 2000 and 2001.